SEARCH AND TECHNOLOGICAL DIVERSIFICATION THROUGH LICENSING: NEW INSIGHTS FROM THE LICENSEE'S POINT OF VIEW

Technology inward licensing plays a crucial role in firm's technology strategy as a way to undertake trajectories of search in the available technological space. The links between licensing and the patterns of firms ' technological diversification are still underdeveloped in the economics and management literature. The aim of our study is to explore these links in a sample of 224 licenses involving about 900 USPTO patents. The paper is centered on two theories. First, in line with the resource-based view, firms diversify through licensing-in knowledge and capabilities that can be easily combined with their existing capabilities. This constrains the span of technologies that are searched for by firms that enter the market for technologies. However, a broad technological profile increases firms ' absorptive capacity and hence reduces the cost of technological diversification through licensing. Also, for any given level of the breadth of firms ' technological profiles, the cost of diversification is affected by the nature of the knowledge offered in the market for technologies. General purpose technologies, for instance, imply a lower cost of technological diversification in that they can be easily combined with a variety of other complementary technologies. Controlling for several dimensions of the licensor, the licensee and the licensed patent, we find that licensees ' narrowness of its technological focus is positively related to while the licensed technology's generality is negatively associated with the degree of relatedness between the licensee s cor